IMF Management Completes the Second and Final Review under the Staff-Monitored Program for Somalia and IMF Managing Director Approves a Third Staff-Monitored Program
IMF News, July 6, 2018
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- Published: July 6, 2018
Overview
- Press Release No. 18/283 — July 6, 2018.
- IMF management completed the second and final review under the second 12-month Staff-Monitored Program (SMP II) with Somalia on June 20.
- The IMF Managing Director approved a third 12-month SMP (SMP III) covering the period May 2018–April 2019.
- Purpose of the SMPs: help maintain macroeconomic stability, rebuild key economic institutions, and build track record on policy and reform implementation.
- IMF staff commends Somali authorities for implementing important reforms in challenging conditions and encourages continued reform implementation under the SMP, particularly on public financial management, revenue administration and policy, and monetary and financial sector.
Macroeconomic outlook and projections
- Economic activity is rebounding from the effects of the drought in 2017.
- Growth and inflation projections:
- Growth in 2018 is projected to increase to 3.1 percent from an estimated 2.3 percent in 2017.
- Inflation is expected to ease to under 3 percent from about 5.1 in 2017.
- Growth drivers cited: strong rainy season, sustained remittances and grant inflows.
Fiscal performance
- Fiscal position has improved since December 2017 reflecting ongoing reforms.
- The federal government of Somalia (FGS) recorded a small fiscal surplus in 2017 due to higher-than-programmed domestic revenue mobilization and budgetary grant disbursements.
- Strong fiscal performance continued through March 2018, partly due to lower-than-projected expenditure and slightly higher domestic revenue.
Program implementation and SMP III objectives
- Program implementation under SMP II has been satisfactory.
- For December 2017, all indicative targets (ITs) and all but one structural benchmark (SB) were met.
- The two SBs and all ITs set for March 2018 were met.
- Staff supports completion of the second and final review under SMP II and the authorities’ request for SMP III.
- SMP III will build on achievements under the previous two SMPs and continue to lay the foundation so Somalia can eventually have a SMP that meets the IMF Upper Credit Tranche (UCT) conditionality — a key requirement for Somalia to reach the Decision Point under the Heavily Indebted Poor Countries (HIPC) initiative.
- SMP III will focus on broadening and deepening reform implementation to:
- maintain macroeconomic stability;
- continue rebuilding institutions and capacity to improve macroeconomic management and governance.
New national currency initiative
- IMF staff supports the authorities’ ongoing efforts to launch a new national currency.
- After nearly two years of the IMF’s technical assistance support, the pre-conditions for the launch of the new Somali Shilling have been nearly completed.
- In March 2018, IMF staff prepared an assessment letter supporting the CBS’s initiative to issue a new national currency.
- Staff encourages authorities to:
- continue to reach out to donors to raise the needed funds for this operation;
- finalize the establishment of the accountability framework;
- fully staff the team that will manage the process.
Risks and donor support
- Risks to the program are elevated.
- Mitigating factors: continued commitment to the reform measures under the SMP and sustained donor support, particularly on technical assistance, peace and state building, resilience and humanitarian aid.
Selected economic and financial indicators (2015–20)
- IMF Quota = SDR 44.20 million; Population: 13 million, 2015 estimate; Poverty Rate: n.a.; Main Export: Livestock.
- National income and prices (levels and rates)
- Nominal GDP in millions of U.S. dollars: 6,659 (2015); 6,767 (2016); 7,052 (2017); 7,405 (2018); 7,822 (2019); 8,256 (2020).
- Real GDP, annual percentage change: 3.9 (2015); 4.4 (2016); 2.3 (2017); 3.1 (2018); 3.5 (2019).
- Per capita GDP in U.S. dollars: 511 (2015); 504 (2016); 521 (2017); 535 (2018); 549 (2019).
- Consumer prices (e.o.p., percent change): -1.2 (2015); 0.0 (2016); 5.3 (2017); 2.8 (2018); 2.5 (2019).
- Central government finances (Percent of GDP; budget data for the Federal Government of Somalia; fiscal operations on a cash basis)
- Revenue and grants: 2.1 (2015); 3.7 (2016); 3.8 (2017).
- Grants: 0.4 (2015); 0.9 (2016); 1.5 (2017); 1.3 (2018).
- Expenditure, of which: 2.0 (2015).
- Compensation of employees: 0.8 (2015); 1.8 (2016).
- Purchase of non-financial assets: 0.1 (2015); 0.2 (2016).
- Overall balance: 1.0 (2015); 1.1 (2016); 0.7 (2017); 0.5 (2018).
- Stock of domestic arrears (Percent of GDP): 1.0 (2015); 1.1 (2016); 0.7 (2017); 0.5 (2018).
- Central bank summary balances (Millions of U.S. Dollars)
- Foreign assets (gross): 68.6 (2015); 60.9 (2016); 89.2 (2017).
- Net foreign assets, excl. IMF (program definition; excludes position in the SDR Department and obligations to the IMF): 21.6 (2015); 24.0 (2016).
- FGS, total deposits (Includes Treasury deposits at the CBS and grants held in external accounts on behalf of the Ministry of Finance): 19.1 (2015); 12.1 (2016); 33.6 (2017).
- Balance of payments (Percent of GDP)
- Current account balance: -4.7 (2015); -6.3 (2016); -6.6 (2017); -5.7 (2018); -5.6 (2019); (2020 value not listed).
- Trade balance: -45.1 (2015); -46.8 (2016); -55.2 (2017); -48.3 (2018); -46.4 (2019).
- Exports of goods and services: 15.6 (2015); 15.1 (2016); 11.5 (2017); 14.6 (2018); 15.0 (2019); 14.8 (2020).
- Imports of goods and services: 60.6 (2015); 61.8 (2016); 66.7 (2017); 62.9 (2018); 61.2 (2019).
- Remittances: 19.5 (2015); 19.7 (2016); 23.5 (2017); 20.4 (2018); 20.5 (2019); 20.7 (2020).
- Foreign Direct Investment: 4.5 (2015); 4.9 (2016); 5.2 (2017); 5.5 (2018); 5.7 (2019); 5.6 (2020).
- External debt: 66.3 (2015); 64.7 (2016); 65.0 (2017).
- Market exchange rate (SOS/USD, e.o.p.): 22,285 (2015); 24,005 (2016); 23,605 (2017).
IMF Press Release No. 18/283 — July 6, 2018.